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1 Peer Reviewed Title: Getting What We Asked For, Getting What We Paid For, and Not Liking What We Got: The Vanishing Civil Trial Author: Yeazell, Stephen Publication Date: Series: UCLA Public Law & Legal Theory Series Permalink: https://escholarship.org/uc/item/4wx654tj Additional Info: 1 Journal of Empirical Legal Studies (2004) Keywords: Civil trial reform Abstract: The current dearth of civil trials may result from two converging trends in civil practice: twentieth-century procedural reforms and associated changes in the organization and financing of legal practice. The procedural reforms required greater pre-trial investigation of facts. Pre-trial investigation often required litigants to make regular investments of substantial capital, access to which was facilitated by changes in the organization of plaintiffs practices. Together, these procedural reforms and changes in practice structure provide a plausible explanation for the observed phenomenon of declining rate and number of civil trials. Copyright Information: All rights reserved unless otherwise indicated. Contact the author or original publisher for any necessary permissions. escholarship is not the copyright owner for deposited works. Learn more at escholarship provides open access, scholarly publishing services to the University of California and delivers a dynamic research platform to scholars worldwide.

2 Getting What We Asked For, Getting What We Paid For, and Not Liking What We Got: The Vanishing Civil Trial Stephen C. Yeazell * Abstract: The current dearth of civil trials may result from two converging trends in civil practice: twentieth-century procedural reforms and associated changes in the organization and financing of legal practice. The procedural reforms required greater pre-trial investigation of facts. Pre-trial investigation often required litigants to make regular investments of substantial capital, access to which was facilitated by changes in the organization of plaintiffs practices. Together, these procedural reforms and changes in practice structure provide a plausible explanation for the observed phenomenon of declining rate and number of civil trials. But the worst feature of American procedure is the lavish granting of new trials. Roscoe Pound, The Causes of Popular Dissatisfaction with the Administration of Justice 1 Ninety eight years ago, Roscoe Pound delivered to an American Bar Association meeting an address on out legal system. In that address, which was still being celebrated by professional leaders fifty years later, Pound argued that popular dissatisfaction with the legal system could be cured by procedural reform, and he had a list of reforms in mind. 2 At the top of his list was a concern about trials. But his concern was the mirror image of the image of ours. He identified as the worst feature of the American legal * 2004 Stephen C. Yeazell, David G. Price & Dallas P. Price Professor of Law, UCLA School of Law. I am grateful to the Litigation Section of the ABA for the opportunity to reflect on the issues raised by Marc Galanter s stimulating paper as well as for the very interesting comments by the distinguished members of the Symposium. As always, I am greatly in debt to the superb reference services provided by the Hugh & Hazel Darling Law Library at UCLA and to its fine cadre of research assistants and librarians and to support provided by the Dean s Fund at UCLA School of Law. In thinking about the topic of this paper I have been greatly stimulated and assisted by the comments of Allen M. Katz, Esq., an experienced and thoughtful litigator, whose understanding of the dynamics of civil lawsuits have opened my eyes to a richer interplay of factors than I would otherwise have suspected, by conversations with Stephen Bainbridge, Kent Syverud, and the perceptive comments of an anonymous review for this Journal. 1 Roscoe Pound, The Causes of Popular Dissatisfaction with the Administration of Justice, 29 REP. OF A.B.A. 395, 413 (1906). 2 Proceedings in Commemoration of the Address, 35 F.R.D. 241 (1964) (commemorating Pound s 1906 address at the 1964 Convention of the American Bar Association). 1

3 system the lavish granting of new trials by appellate courts. In the near-century since Pound s pronouncements, we have moved to the opposite pole. Rather than worrying about repeated trials of the same case, we now convene a symposium to consider whether trial itself, to say nothing of repeated trials, is an endangered species, and what to do about it. 3 I bring to this conversation both a word of hope and a word of caution. My principal argument is that we should take both the hope and the caution seriously, lest, at the start of the 22d century, our great-grandchildren be gathered to consider again how to cope with the deluge of trials that threatens the legal system. The hope and the caution both spring from the same source: one plausible understanding of our situation lies in well-known features of the legal landscape that were intentionally put in place over half a century. Some of these changes involved procedural reforms that culminated half a century of bar debate and advocacy. Others came from broad transformations in the financial structure of the U.S. economy; still others involved the restructuring of the legal profession. In combination, these changes provide one explanation for the nearly complete privatization of fact investigation, and the concomitant disappearance of civil trials. Those changes have decreased the trial rate from about one in five civil cases at the start of the 20th century to about one in fifty civil cases at the start of the 21st century. Whether one thinks of the vanishing trial as a triumph of privatization or as an abdication of public and professional responsibility, it is important to consider this story of how we got here, because our present situation may flow from a whole system. Trial numbers and rates can be seen as the symptom of these changes, not their cause. Nor need we view the symptoms as signs of a disease. The decline of civil trials is an interesting trend, and it is important that we understand the demography of litigation far better than we do; that makes this symposium an opportunity to be grasped. But it 3 Logically, of course, it is possible that we suffer from both phenomena: a dearth of civil trials and an appellate propensity to excessive reversal of those few trials that occur. See, Stephen C. Yeazell, The Misunderstood Consequences of Modern Civil Process, 1994 WIS. L. REV. 631, Over the last half century, two scholars have argued, without regard to the proportion of civil trials, that appellate courts are too quick to reverse jury verdicts. See Charles Alan Wright, The Doubtful Omniscience of Appellate 2

4 doesn t follow that a trial rate of 2% is a national crisis, or that we would be better off as a nation or a profession if we returned to the one-in-five rate that prevailed a few decades after Pound s polemic. 4 Whether the decline of trials points to pathology or to a different form of homeostasis depends on what we want the civil litigation system to do and how we think it ought to be financed. Those questions, not just the trial rate, should be the focus of broad attention. This paper offers an explanatory hypothesis--that the present state of civil trials results from the convergence of two developments: first, what we asked for--a century of procedural reform and changes in the legal profession incorporating the consensus of some very thoughtful people; second, what we paid for--a half century of evolution in the demography and economy of the bar. Having got what we asked for and paid for, we are now soberly assessing the results. Such an assessment and any proposals for change will, be better if we understand more completely why we stand where we do today and, if we don t like the current state of affairs, whether we would like even less changes that might produce a higher trial rate. I. Appreciating Galanter A first approach to this topic requires that we appreciate the significant contribution Marc Galanter has made to our understanding. He has marshaled all the data, and in the process has demonstrated several points that bear underlining, if only because several of them diverge not only from popular wisdom but even from the understandings of generally well-informed observers. First, Galanter presents good data in ways that do not jump too quickly from the descriptive to the normative; this is a great virtue. And, to the limited extent to which it is possible, he does not assume that the only data is the federal data, thus missing the Courts, 41 MINN. L. REV. 751 (1957); Eric Schnapper, Judges Against Juries--Appellate Review of Federal Civil Jury Verdicts, 1989 WIS. L. REV

5 98% of the cases tried in the states. One of the important things revealed by this state court data is that, while the state court trends run in the same direction as the federal data, the number and the proportion of state court trials are significantly higher than in federal courts. In the years for which Galanter has data, the state trial rate ranged from a high of 34% to a low of 14%--at all times maintaining a rate not only higher but higher by a multiple of the federal trial rate. 5 I return to this point later because whether one thinks of the present federal trial rate as a pathology or an achievement, the state data offer a point of comparison and a basis for thinking about which features produce which results. Second, Galanter runs his trial numbers not just against filings but against other relevant indices, including most notably those involving population and GDP, revealing that litigation rates are keeping pace with population and are lagging far behind economic growth, a point that has escaped some otherwise sophisticated observers. To reinforce Galanter s data, consider a very crude chart that tracks the comparison between population, civil filings, and gross domestic product in the U.S., using the much larger universe of state court filings as the yardstick: 6 4 See Yeazell, supra note 3, at Marc Galanter, The Vanishing Trial: An Examination of Trials and Related Matters in State and Federal Courts 68 (Preliminary Version, October 24, 2003) (hereinafter Galanter). 6 Data are derived from EXAMINING THE WORK OF STATE COURTS, 2001: A NATIONAL PERSPECTIVE FROM THE COURT STATISTICS PROJECT PAGES (Brian J. Ostrom et al. eds., 2001); U.S. Census Bureau. 4

7 typically correlates strongly with economic development, 7 it is important for those who design and operate civil litigation systems to understand that in this respect not only trials but civil filings are substantially lagging one obvious correlate. That lag has implications for the design of policy as well. For legislators wondering whether litigation is out of control, these two comparison points suggest not: measured either against population or economic activity, litigation rates are either holding steady or declining. Finally, though less directly, Marc Galanter s data provides confirming evidence of the confluence of two long-term trends in civil litigation in the twentieth century. The numbers illustrate the effect of changes in procedural design and of changes in litigation finance. In procedural design, we have got what we wished for; in litigation finance we have got what we paid for. II. Getting What We Asked For The quotation from Roscoe Pound at the top of this paper captured not only his views of trial but in many respects the agenda of thoughtful procedural reformers in the twentieth century. Trials, especially in the common law tradition, are in many respects wasteful: they produce a victor, but at great cost to both sides and to the public. To quote a pair of more contemporary observers, a trial is a failure. 8 Moreover, at the start of the twentieth century trials often produced a victor on the basis of incomplete information about the historical facts underlying the dispute. In many respects the procedural agenda of the century just past has sought to change these features--which were flaws in the eyes of the reformers. And we have done so--so completely that we now worry about the results. A. Procedural Reform in the Twentieth Century 7 Christian Wollschläger, EXPLORING GLOBAL LANDSCAPES OF LITIGATION RATES, in SOZIOLOGIE DES RECHTS: FESTSCHRIFT FÜR ERHARD BLANKENBURG ZUM 60. GEBURTSTAG (Jürgen Brand & Dieter Strempel, eds. 1998). 8 Samuel R. Gross & Kent D. Syverud, Getting to No: A Study of Settlement Negotiations and the Selecction of Cases for Trial, 90 MICH. L. REV. 319, 320 (1991). 6

8 Writing fifteen years ago, Samuel Gross and Kent Syverud gracefully summarized the guiding principles of procedural reform in the twentieth century: With some notable exceptions [most of whom, the authors noted, were academics], lawyers, judges, and commentators agree that pretrial settlement is almost always cheaper, faster, and better than trial. Much of our civil procedure is justified by the desire to promote settlement and avoid trial. 9 Procedural reform in the twentieth century reflected this belief. It did so in four ways, all of which incorporate what one might call a Progressive version of procedure: the belief in facts rather than law, the belief in information rather than argument, and the belief in broad rather than narrow focus for disputing, and a belief in agreement rather than adjudicated conflict. The central procedural changes of the twentieth century reflected these beliefs. They diminished the role of pleading, greatly expanded the mechanisms of pretrial discovery and role of expert witnesses, and enabled broad joinder. Each of these changes should have affected trial rates. By lowering pleading barriers, the designers of procedural rules raised the number of plausible filings. This is not a small point. Even if we had held all other aspects of the system constant, by relaxing pleading requirements we would have increased the number of filings relative to the number of cases with sufficient merit to reach trial--and thereby dropped the trial rate. One of the great merits of Galanter s data is that he shows that something more is happening: not just the proportion of cases but the absolute number of cases reaching trial has diminished, teaching us that we need to look further than pleading reforms for an explanation of the data. The second part of the story is discovery. The drafters of the Federal Rules of Civil Procedure and the state legislators and rulemakers who followed the pattern established by the federal reforms all believed that it was better to uncover the truth, the whole truth--before trial-- and thus to diminish the effect of theatrics and of surprise at trial. 10 Looking at U.S. civil process at the turn of the twentieth century, they concluded that it was not well adapted to the transformed conditions of social and economic life, 9 Id. 10 Geoffrey C. Hazard, Jr., From Whom No Secrets Are Hid, 76 TEX. L. REV. 1665, 1665 (1998). 7

9 particularly in disputes where one of the parties was a bureaucratic institution, either private or public. And they were probably right. Once a society moves to a culture of record-keeping and complex organizations, sorting out disputed events and responsibilities will become more accurate but take longer. Unlike the civil code nations, the United States had not trained a cadre of elite bureaucrats whose job it was to sort out the facts of civil disputes. Even the elite members of its bar and bench operated within a framework that made it difficult or impossible to pull together substantial bodies of evidence, much of it in the hands of adversaries. That made trials of such cases hard to conduct and too likely to turn on advocates tricks or surprise witnesses. Before discovery common law trials often denied the parties and the judiciary an opportunity without the pressures of trial to sort through alternative lines of evidence, consider their coherence and to arrive at a thoughtful conclusion about what it meant. Civil law systems put in the hands of the judge the decision about how much factual investigation will occur. 11 Contemporary common law process now enables the parties, and, to a lesser extent, the judge, to do the same sifting because discovery will have unearthed almost everything salient about the case in addition, we should candidly admit, some things that are not particularly salient. Modern pretrial process was designed to make surprise at trial virtually impossible, 12 and it has largely done so. U.S. litigants have at their disposal an array of devices that, if properly deployed, enable the uncovering of astonishing amounts of information. These devices have another effect that bears on the phenomenon of the vanishing trial: they place the power of investigation primarily in the hands of the lawyer. At the time Pound wrote, there were cases in which relevant, unprivileged evidence could be uncovered only by the use of a trial subpoena. As a result, there were surely some lawsuits in this era in which trial itself was being used for the purpose of discovery. It is hard to imagine such a case today: anything that could be introduced at trial (as well as a 11 See KUO-CHANG HUANG, INTRODUCING DISCOVERY INTO CIVIL LAW (2003) (arguing that the placement of investigative authority in the hands of officials who lack the incentive to investigate yields inadequate factual bases for civil litigation in civil law systems). 12 One can find cases in which relevant, unprivileged evidence that appeared shortly before trial is excluded on the grounds that in modern civil litigation one expects that both sides will know of all the evidence 8

10 much that cannot be introduced at trial) can be discovered beforehand. But when it is uncovered today, the uncovering occurs at the initiative and under the control of the parties lawyers, who can at the same time begin to decide whether and how to settle. By privatizing the uncovering of historical facts we have placed new power in the hands of the parties, power they regularly employ to settle their cases without adjudication on the merits. It is hard to argue with the reformers goal: historical truth or something like it is an attractive aim, and lawyers tricks and surprise are not the stuff on which one wants serious decisions to be made. One wants the parties to know beforehand about the prior disciplinary record of the physician accused of malpractice, as well as the hypochondriac tendencies of his patient, the plaintiff. One wants to know the state of the brakes of the defendant s car and of the epileptic seizures of the plaintiff. And this is the stuff of simple litigation. Such preparation is not merely desirable but essential to some cases. One cannot imagine the development of products liability law or securities litigation or antitrust without the kind of deep discovery permitted by contemporary pretrial discovery and the growth in the use of expert testimony. Maybe more important, civil litigation has emerged as a real, if often controversial, alternative to regulation in the modern economy. A generation ago bar symposia like these were full of debates about the merits and the techniques of the then-still-new discovery system. Great thrashings about the existence and scope of work product protection, a new emphasis on the doctrines of evidentiary privilege (because they protected the otherwise discoverable), concerns about the conditions under which experts could be deposed, and the like filled professional and to a lesser extent academic literature. More recently, professional literature and symposia have focused on the use and abuse of expert testimony. The defense bar mounted an expensive and partially successful attack on the use of expert testimony. But even after Daubert 13 and a well-orchestrated attack on junk science, large numbers of experts, not just from the traditional professions, but in a range of fields from plant before the trial begins. See, e.g., Klonoski v. Mahlab, 156 F.3d 255, 257 (1st Cir. 1998) ( We find that this constituted trial by ambush. We vacate the judgment below and remand for a new trial. ). 13 Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579 (1993). 9

11 security to accident reconstruction regularly produce reports, depositions, and testimony in a wide range of cases. 14 Discovery and expert testimony have combined to create a fundamentally new possibility. They permit a properly financed lawyer to bore deeply into an adversary s files, to try out lines of questioning that might turn out to be a dead end, and to inspect documents, objects, while still shaping strategy and without being bound to offer them in evidence. No other legal system has to date attempted these on the scale characteristic of American litigation. 15 The system, though essentially private and adversarial, can marshal facts in a manner that resembles an administrative investigation. I emphasize these points not because they show that modern discovery is a freak or monster, but because it helps us understand the decline in civil trials. B. Settlement & Trial Dynamics in Modern U.S. Procedure Paradoxically, discovery leads to a decline in trial because it allows litigants to explore, without the constraints of trial theories of liability or defense, factual avenues that would have been practically and tactically impossible at trial. In concept, modern discovery merely accelerated the time at which a party could be required to disclose information under oath, accelerated it from trial to an earlier period. Or so said Hickman v. Taylor, 16 the leading Supreme Court case on the topic. But Hickman missed the point in this respect. Lawyers have for years been telling other lawyers never to ask a question of a trial witness to which the lawyer does not already know the answer. There are doubtless excellent tactical reasons for this advice. But discovery allows and encourages lawyers to do just that--to explore, tentatively, lines of inquiry that may later be abandoned as fruitless. Combined with easier pleading rules, this aspect of discovery means that more cases will survive to, but not beyond, discovery because a party discovers that his claim or defense is weaker than he thought. Again, however, we 14 See generally, DAVID A. SKLANSKY, EVIDENCE: CASES, COMMENTARY, AND PROBLEMS (2003). 15 HUANG, supra note 11, at ( The continental treatment of evidence has led to the observation that it contains a considerable degree of tolerance for or a relative indifference to the incompleteness of the evidentiary materials received and considered by the court for fact-finding. The direct result of this tolerance or indifference is the reduced accuracy of fact-finding. ) U.S. 495 (1947). 10

12 must recall that Galanter s data takes us beyond this point by demonstrating that not just the proportion but the absolute number of trials has declined. What does this have to do with discovery and experts? Discovery and expert testimony have four effects relevant to our topic. First, they create some of the complex cases on which Galanter reports. I am enough of a postmodernist to believe that some (though surely not all) complex litigation is in the eye not of the beholder but the discoverer. There are few patterns of human interaction on which more light and therefore more nuances cannot be shed by deeper investigation. Discovery enables that investigation if the stakes warrant it. Expert testimony allows the fruits of that investigation to be screened by critics whose credentials make it difficult to brush aside. To that extent it may account for the somewhat greater length of the cases that do reach trial, a development Galanter documents. 17 Another factor adding to the length of trial is modern joinder. If what one uncovers in discovery suggests that there is another party responsible for my injury, or if, as a defendant, one seeks to pass on all or part of that liability, joinder beckons. Second, discovery and the availability of expert testimony are preconditions for some kinds of modern litigation: securities fraud and product liability provide two examples. Consider whether modern products liability could have developed in the absence of discovery and the broadened use of expert testimony, even if the substantive law were in place. Product liability law requires the plaintiff to demonstrate that existing engineering or science should have predicted the risk in question and that a reasonable change in design could have avoided the risk. As a practical matter, both demonstrations require something like modern discovery. In theory an expert without prior access to defendants documents and deposition testimony could testify at trial; but the practical obstacles to such testimony being convincing to the trier of fact are slim. Comparing U.S. and European product liability regimes provides further substantiation of this point. My information suggests that the substantive regime of, say, German law is not dramatically 17 Galanter, supra note 5, at

13 different from that of U.S. law. 18 And the German judiciary is perfectly capable of digesting and comprehending expert testimony. What s missing is the combination of access to documents and witnesses on one hand, and the motivation and financing to assemble, mull, and synthesize the information thus provided. 19 Third, discovery produces a great deal of information, some about one s own case and almost as much about the other side s case. It is not surprising that such information will sometimes produce converging estimates of the likely outcome of the trial (though Galanter usefully notes how badly even experienced lawyers often make these estimates-- a point to which I shall return). On the basis of this information the parties will often settle. That point is important: modern discovery itself produces settlements, regardless of the judge s behavior or the availability of devices like early neutral evaluation and settlement conferences. Comparative data again illuminate, suggesting that in civil law systems--in which parties cannot force discovery--have trial rates ranging between 30% and 70%, manifold higher than those in any U.S. jurisdiction. 20 There are several possible explanations for this variance, but the existence of robust (and expensive) discovery in the U.S. must rank high among the possibilities. 21 Discovery produces settlements because it produces information that can be introduced at trial and it produces information about what the other side can produce at trial. It enables a lawyer to make some estimate of the information that will come before the trier of fact. Those estimates need not be accurate ones; indeed, some studies suggest that even experienced persons are not very good estimators of case outcomes. 22 All that is necessary is that the 18 See Gary Schwartz, Product Liability & Medical Malpractice in Comparative Context, in THE LIABILITY MAZE: THE IMPACT OF LIABILITY LAW ON SAFETY AND INNOVATION 28, (Peter W. Huber & Robert E. Litan, eds. 1991). 19 A similar point exists in relation to securities litigation, at least in publicly traded companies. Once we are beyond the simplest forms of garden-variety fraud, the plaintiff s case will rest on auditors reports, internal documents allowing the inference of scienter, and so on. Absent discovery, it simply would not be possible to produce an effective case if one had available only the information produced by trial subpoenas, without the ability to ladder and stage the production of information, ability created by the discovery regime. See, e.g., Erica Beecher-Monas, Enron, Epistemology, and Accountability: Regulating in a Global Economy, 37 IND. L. REV. 141, 177 (20003). 20 HUANG, supra note 11, at See Id. at for a theoretical demonstration that discovery is a likely cause of the discrepancy. 22 See Roselle L. Wissler et al., Decisionmaking About General Damages: A Comparison of Jurors, Judges, and Lawyers, 98 MICH. L. REV. 751, 811 (1999) (reporting that the awards our jurors actually gave tended to be smaller than the awards the judges and lawyers predicted they would give. One might expect the 12

14 estimates, however flawed, converge. In the absence of discovery the only way to gain some of this information was to go to trial. Otherwise put, in the world before 1938 trial was often the only real way to do discovery, and some of the trials in this earlier era can be seen as in-court efforts to seek information. 23 So, all other things being equal, extensive discovery will lower the trial rates because it produces information. Fourth, discovery and expert testimony substantially increase costs and require continuing investment. At one level that point is unbearably obvious. I want, however, to argue the less obvious point that those costs may change both parties calculations about the desirability of settlement and the risks of trial. U.S. litigation usually requires each side to bear its own litigation costs, including most notably discovery and expert witnesses. Insurance companies, who watch litigation costs closely, tell us that law is usually cheap while fact investigation and discovery are usually expensive. Typical retainer agreements for insurer-engaged counsel require the defense lawyer to seek permission from the carrier before taking a deposition, engaging an expert, or seeking any form of expensive discovery. On the plaintiffs side experienced lawyers listening to a prospective clients story of an injury will be mentally calculating the extent of investment--in experts, in fact investigation, in discovery--necessary to bring the case to a point where either trial or a credible discovery offer is possible. These costs are not just a barrier to litigation--though they are certainly that. They also produce a game of competitive investment. Both parties are trying to buy victory by investing in discovery. Discovery may uncover information that will strengthen one s case. Discovery will likely uncover both strengths and weaknesses in the opponent s case. Discovery will almost certainly require a symmetrical investment expertise of judges and lawyers to include accurate predictions of what jurors will do.... Systematic errors call for explanations.... ); Murray S. Levin, The Propriety of Evaluative Mediation: Concerns about the Nature & Quality of an Evaluative Opinion, 16 OHIO ST. J. ON DISP. RESOL. 267, (2001) (reaching a similar conclusion on the basis of less elaborately analyzed data, reporting dramatic differences in the estimates of insurance adjusters, lawyers, and similar persons). 23 That phenomenon persisted for several decades after 1938, in part because the bar took some time to exploit fully the possibility of discovery and in part because there was a lag of some decades before all the states substantially adopted the Federal discovery regime. See generally Stephen N. Subrin, Fishing Expeditions Allowed: The Historical Background of the 1938 Federal Discovery Rules, 29 B.C. L. REV. 691 (1998). 13

15 by one s adversary: depositions must be defended; interrogatories must be answered or properly objected to; experts require counter-experts and so on. These discovery and experts costs mean that as the case progresses, the parties must regularly make decisions about additional investments, and must consider how various litigation events bear on the likely return of investments already made. Classical economic theory tells us that sunk costs should not influence decisions about whether to make further investments: the only thing that should matter, from the stance of cold rationality, is whether additional investment will yield gain. 24 Social psychologists tell us that many of us behave less rationally than this: that sunk costs often cause people to persist in investments beyond the point at which they should. 25 The phenomenon of the vanishing trial displays, I think, both principles at work. I stress these costs because, although lawyers appreciate them well, some of the academic literature (including some written by me) fails completely to appreciate the role of discovery and expert testimony in producing the propensity to settle. Before discovery, the propensity to settle was largely a matter of balancing size and chance of victory against the size and likelihood of defeat at trial. But little was required by way of continuing pretrial investment, because little could be invested beforehand. Discovery and expert testimony changed that calculation: they not only enabled substantial, continuing pretrial investment but required it. And the staged character of discovery forced litigants regularly to confront the question of whether to continue to invest in the outcome of adjudication. In making their investment decisions, litigants and lawyers must contend with two added uncertainties: first, the substantive law pushes trial outcomes away from smooth curves and toward bimodality; second, mean and median judgments differ substantially See, e.g., Eric S. Dickson & Kenneth A. Shepsle, Working and Shirking: Equilibrium in Public-Goods Games with Overlapping Generations of Players, 17 J.L. ECON. & ORG. 285, 301 (2001) ( It is a central tenet of rational choice theory that individuals honor neither sunk costs nor sunk benefits in deciding on future courses of action. ). 25 See, e.g., J. KEITH MURNIGHAN, BARGAINING GAMES: A NEW APPROACH TO STRATEGIC THINKING IN NEGOTIATIONS (1992). 26 See generally Samuel R. Gross & Kent D. Syverud, Don t Try: Civil Jury Verdicts in a System Geared to Settlement, 44 UCLA L. REV. 1 (1996) [hereinafter Gross & Syverud, Don t Try]. 14

16 Both factors complicate trial-or-settlement calculations. Bimodality is perhaps the most obvious point. In civil trials, adjudicators must first decide whether the defendant is liable; if the answer is no, the plaintiff recovers nothing. If the defendant is liable, the adjudicator must, in most cases, calculate damages. 27 In some cases, the range of those damages can be very large--for example, pain and suffering or punitive damage awards have a broad range. 28 These two factors push litigants calculations about possible outcomes in opposite directions. The bimodality bias of the much of the substantive law creates a very substantial all-or-nothing risk. The range of damages allowable in many cases creates the opposite possibility--smoothing the curve of possible adjudicative outcomes. We know something about the outcome of these opposing characteristics on actual verdicts. Several studies have confirmed the proposition that median verdicts hover around the $40,000 mark, but that a very small right hand tail reflects the six-and seven-figure verdicts that make headlines and reputations. 29 One study of the entire universe of jury verdicts in California for two different years found that between twothirds and three-quarters of all civil damages awarded came in five per cent of the verdicts. 30 As a group, plaintiffs and their lawyers will be investing in litigation with the hope they will prove successful at trial, and, if so, that their verdict will form part of the small right-hand tail that creates the spread between mean and median verdicts. As a group, defendants will be seeking either a total defense verdict or, failing that, a damage award in the median range. The prospect of settlement presents two possibilities. First and most obviously, it ends the need for continuing investment; the balance sheet can be closed. Second, and somewhat more subtly, it shifts control of the outcome into the lawyers and parties hands and presents the possibility of smoothing the curve of possible outcomes: negotiations can produce results along an even curve. Settlement thus 27 The exception to this proposition comes in contract claims where damages are either liquidated or otherwise known, as with, for example, a promissory note. 28 In the instance of punitives, the U.S. Supreme Court has presumptively limited punitive awards acceptable under the due process clause to less than ten times the amount of compensatory damages. State Farm Mut. Ins. Co. v. Campbell, 538 U.S. 408, (2003). 29 Cite to Eisenberg, etc. 30 Gross & Syverud, Don t Try, supra note 26, at

17 reduces risk in two ways: it attacks both the uncertainty and the bimodality of legal judgments. The attractions of these features of settlement deserve further exploration after an explanation of a second contributor to the decline in trials. Changing procedural rules and customs may, by themselves, have contributed to the changes reflected in Galanter s data. But they were likely accelerated by changes in the demography, economics, and regulation of the U.S. bar. III. Getting What We Paid For The preceding paragraphs, with their emphasis on symmetrical investment by the parties, imply a symmetrical system of litigation finance. Such a system is for many claims and for many parts of the bar now a reality. That symmetry has implications for trial rates. If the ability to invest in discovery and experts were systematically asymmetrical, available in practice only to the defense bar, I believe we would have less settlement and higher trial rates--as we did seventy-five years ago. Changes in litigation finance, in practice patterns, and, to a lesser extent, in professional regulation contribute to the phenomenon of the vanishing trial. An effort to understand--or to alter--the trial rate without reference to these features is therefore likely to fail. The sketch below cannot deeply document these changes. Fortunately most of the changes are uncontroverted. The task is rather to connect these familiar developments with their effect on trial rates. A. Reconfiguring the Bar Seventy-five years ago the plaintiff s and defense bars were systematically asymmetrical in resources. The plaintiffs bar, if it could be dignified by such a name, consisted of under-capitalized and sometimes poorly educated lawyers who were widely accused of improperly soliciting clients, suborning perjury, and worse. 31 More to the point of this exploration, they were systematically outgunned by the defense bar, usually 31 See JEROLD S. AUERBACH, UNEQUAL JUSTICE: LAWYERS AND SOCIAL CHANGE IN MODERN AMERICA (1976). 16

18 retained by insurers. Were there a serious question of investing in litigation--and there usually wasn t because the plaintiff lacked the resources to make such investment necessary--the insured defendant could bring substantial resources to bear, without plaintiff s being able to match them. Under these circumstances one can imagine three outcomes. One would be simple abandonment of the case by the plaintiff, unable to respond even to motions to dismiss; anecdotal evidence suggests such outcomes were common. 32 Another, perhaps more likely would be the acceptance of an offer very heavily discounted by defendant s knowledge that the plaintiff lacked the financing (and perhaps the skill) to bring the case to trial. Again, anecdotes suggest that such outcomes occurred frequently, and still occur, to the extent that less-elite segments of the plaintiffs bar are undercapitalized. 33 But in some cases--perhaps one out of five, if my historical data on the federal courts applies as well to the states--the case would be simple enough and the plaintiff s lawyer and client able to hang on long enough to bring the case to trial. 34 Trial had two substantial attractions for our hypothetical plaintiff. First, there might well be witnesses or documents he could obtain only by the use of a trial subpoena. Second, and probably more important, trial had a significant upside and virtually no downside. If defense settlement offers had been low, trial might be the only chance for a significant recovery. And a loss at trial though it would involve the costs of the lawyer s time, would not involve the loss of significant out-of-pocket investment because the plaintiff (or his lawyer) had made no such investments. 32 See, e.g., John F. Vargo, The American Rule on Attorney Fee Allocation: The Injured Person s Access to Justice, 42 AM. U. L. REV. 1567, 1596, 1604 (1993) ( Individuals and organizations with substantial resources can utilize the legal system because they can afford to pay legal costs and withstand the effects of delay. A party lacking substantial resources is at an obvious disadvantage. The disparity of resources between litigants may result in one party outspending the other and, as a result, affecting the result of the controversy Defendants have the wealth, knowledge, and resources to investigate and prepare a case for trial. Thus, a severe structural imbalance exists between plaintiffs and defendants. ); Yeazell, supra note 3, at 638. JEROME E. CARLIN, LAWYERS ON THEIR OWN: A STUDY OF INDIVIDUAL PRACTITIONERS IN CHICAGO PAGE (1962). Keep this? I ve been unable to locate support for the proposition. I can dig deeper into the book but it could take too long. 33 See Sarah Parikh, Professionalism & Its Discontents: A Study of Social Networks in the Plaintiffs Personal Injury Bar (2001) (unpublished Ph.D. dissertation, University of Illinois at Chicago) (on file with author) (reporting on higher rate of pre-filing settlement by less elite members of the plaintiffs bar) [hereinafter Parikh, Professionalism]. 34 Yeazell, supra note 3, at

19 Today, the financing, and thus the strategy of trial and investment have changed in ways that render the adversaries more evenly matched. That symmetry allows more equal investments. More equal investment in litigation changes the dynamics of settlement. The staged character of litigation investment as discovery proceeds presents litigants with continuous decisions about whether to proceed or settle. And litigants want to think about those decisions. For example, when insurance carriers hire outside defense counsel, they typically insist on consultation and specific permission before counsel take steps that have significant financial implications (e.g., engagement of experts, taking of depositions). Because staged pretrial processes will require symmetrical investments, the parties must regularly and specifically confront the question of whether to settle or to continue to invest. Because continued investment depends on capacity, and capacity is likely to be the least well understood of the phenomena under discussion, it is worth brief elaboration. The U.S. bar has famously grown in size, both in absolute numbers, and on a per capita basis. Just as important has been the change in the size of many of the practice groups. References to mega-firms with hundreds or thousands of lawyers are common parts of the literature and of our students lives, particularly for those among us whose students and colleagues inhabit the upper hemisphere of the bar. To understand the vanishing trial, however, the 2000-lawyer firm is less significant than a more pervasive shift at the other end of practice. Until the most recent decades, most U.S. lawyers were solo practitioners, 35 a group that still comprises about a third of the bar. In the last two decades, however, for the first time more U.S. lawyers were practicing, not alone, but in at least small groups. It is important to stress the small size of these practice groups: there are far more U.S. lawyers practicing in groups of 5-12 than in groups with more than a hundred lawyers. Recent data from the largest bar in the U.S. give us a sketch of the present and some sense of the future. In 2001 only 35% of active members of the 35 See RICHARD L. ABEL, AMERICAN LAWYERS 300 (1989) (reporting on tabulation of lawyers listed in Martindale-Hubbell). 18

20 California bar reported themselves in solo practices. 36 And of all active lawyers in that state, almost 70% reported themselves in a practice group that included some other lawyers. 37 For our purposes the change from one to ten lawyers is more important than the change from fifty to two hundred lawyers. Consider the effect of these changes, starting with the plaintiffs bar because the changes here are greater and because they drive some of the defense bar shifts. Capitalization, diversification, and case selection are the keys to this change, and one of the keys to the dropping trial rate. As we have seen, modern litigation will often require significant investments that may not bear fruit for several years. A lawyer representing a plaintiff in an ordinary auto accident case, still the most common civil filing in the U.S., must count on retaining experts to testify concerning the extent of the plaintiff s injuries, including any long-range effects, perhaps about the causes of the accident, perhaps about municipal liability for road design or traffic management. Many of these experts will require retainers for their initial investigation or reports, more investments to depose them and their counterparts--and so on. Bankrolling such a case (and this is emphatically a simple rather than a complex case) generally will require two things: a line of credit from a lender and several colleagues whose work diversifies the risk for the entire firm. Both phenomena are now common, and they reinforce each other. Banks finance law firms, and lenders will frequently advance more credit when the practice has depth (several lawyers) and diversity (a mix of cases). 38 Practice groups often purposely engage in a range of work, some of which may produce modest but predictable income, part of which can be used to invest in larger, less predictable cases. 39 Alternatively, the firm may specialize in personal injury litigation but have enough lawyers and cases to average risk across the portfolio, so that there will be a predictable income stream. In either case, a practice 36 Richard Hertz Consulting, Final Report: California Bar Journal Survey (Sept. 10, 2001), available at 37 Id. 38 quote from CA Lawyer 39 Herbert M. Kritzer, The Wages of Risk: Returns of Contingency Fee Legal Practice, 47 DEPAUL L. REV. 267, 303 (1998). 19

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